Right aid pharmacy face off


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A comparison between the three largest U.S. operators of retail pharmacy chains. Given the significant increase in prescription demand tied to the Affordable Care Act, which of these three pharmacy operators is best positioned for growth.

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Right aid pharmacy face off

  1. 1. Pharmacy Face-Off Rite Aid Vs. Walgreen & CVS
  2. 2. Rite Aid, Walgreen & CVS Dominate • Each of the three companies has been expanding into services typically performed by primary care doctors to boost foot traffic. The most aggressive has been CVS, which has opened more than 800 MinuteClinics nationwide. But Walgreen has also opened hundreds of clinics and Rite Aid has made a big push into flu shots and vaccines too. • As a result, all three are locked in a very competitive battle for market share ahead of a resurgence in high profile branded patent expiration. Since more than $65 billion worth of branded drugs will lose protection next year, which of these three is best positioned to drop profit to the bottom line?
  3. 3. Store Count and Store Count Growth 1. CVS retail store count finished 2013 at 7,670, up from 7,477 exiting 2012. 2. Walgreen operates 8,210 stores at year end, up from 8,072 a year ago. 3. Rite Aid’s store count fell from 4,633 to 4,595 in the year ending November. While CVS and Walgreen continue to increase their store footprint, Rite Aid is in the middle of a restructuring that has it closing unprofitable stores.
  4. 4. Debating Revenue CVS and Walgreen have more moving pieces in their revenue thanks to acquisitions that moved them into the Pharmacy Benefit Management side of the pharmacy business. That diversification gives them a revenue edge.
  5. 5. Debating Margin As you can see in the following chart, Rite Aid’s restructuring and highly successful Wellness rewards program has returned it to profitability, while CVS and Walgreen’s operating margin has been steady and predictable.
  6. 6. Debating Earnings CVS has the best track record of growing earnings over the past five years, but Rite Aid gets high marks for making the decisions necessary to get back on solid footing.
  7. 7. Debating Valuation Part 1 Since Rite Aid began making money in 2013 (see chart) investors can compare its price to earnings ratio to its peers. Currently, investors are paying more for Rite Aid’s earnings than for the other two companies, suggesting that in terms of P/E ratio, CVS is the better value.
  8. 8. Debating Valuation Part 2 That’s reinforced by the P/E to growth measure, or PEG ratio, which also shows Rite Aid is the most expensive of the three.
  9. 9. Key Takeaways All three pharmacies benefit from demographic trends, expansion into adjacent primary care markets, and rising use of higher margin generic drugs. •CVS is growing its retail store footprint quicker than the other two, with its store count growing by 2.5% last year. •CVS offers the more consistent top line growth over the past decade. •CVS has market leading operating margin, that allows it to drop more growth to the bottom line than competitors •CVS appears to be the better value based on both P/E ratio and PEG Ratio
  10. 10. Six stock picks poised for incredible growthSix stock picks poised for incredible growthSix stock picks poised for incredible growth Six stock picks poised for incredible growth
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